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Copper strikes 5-week low on selling stimulated by dollar dive

Copper costs fell to five-week short on Thursday as the dollar leapt to near two-year peaks after the U.S. Federal Reserve signified rates would be cut at a slower rate next year.

Also weighing on industrial metals was the prospect of U.S. President-elect Donald Trump enforcing tariffs on imports, which might trigger a trade war and hit economic growth and demand around the world.

Benchmark copper on the London Metal Exchange ( LME) was down 1.3% at $8,906 a metric load at 1124 GMT from an previously $8,893, the most affordable given that November 14.

A rising U.S. currency makes dollar-priced metals more costly for holders of other currencies and suppresses need.

This relationship is utilized by funds that trade utilizing mathematical models. Traders stated these funds began selling as the dollar climbed after the Fed stated further reductions would depend upon reining in stubbornly high inflation.

It's all to do with the dollar at the moment, a metals trader said, including that the prospects of a trade war in between China and the United States on the horizon was also behind the selling of industrial metals.

Trump has sworn to slap across-the-board tariffs of 60%. on China, the world's biggest consumer of commercial metals,. which is likely to retaliate. China is likewise expected to respond. with fiscal and monetary stimulus to increase its growth.

We will see a pull of war in belief between Trump's. tariffs and China's stimulus action, said Piotr Ortonowski,. analyst at Criteria Mineral Intelligence.

This policy unpredictability will drag out throughout. much of next year, which will likely to keep copper costs more. rangebound than in previous years.

In other places, zinc fell to a one-month low at. $ 2,952.5 a heap as concern about need from China's steel. manufacturers and its construction sector enhanced the selling. pressure created by the dollar. It was last down 0.5% at $2,978.

In other metals, aluminium ceded 0.4% to $2,517,. lead slipped 0.9% to $1,963, tin pulled away 1.9%. to $28,560 and nickel fell 1.2% to $15,315.

(source: Reuters)